Grayscale Investments has filed a lawsuit against the Securities and Exchange Commission (SEC) after its spot-based Bitcoin exchange-traded fund (ETF) was rejected. The firm said its Senior Legal Strategist, Donald B. Verrilli Jr. the former US Solicitor General, had filed a petition for review.
Verrilli highlighted that the latest decision shows that the SEC is acting arbitrarily and capriciously by failing to apply consistent treatment to similar investment vehicles. He said Grayscale Investments will pursue a legal challenge based on the agency’s alleged violation of the Administrative Procedure Act (APA) and Securities Exchange Act (SEA).
It should be noted that Grayscale Investments has $12.92 billion of assets under management in its GBTC. It had been earnestly awaiting SEC’s decision to convert its flagship Bitcoin trust into a spot-based ETF since filing its application on October 19, 2021. SEC rejected the application to protect investors and the public interest. The agency stated that the proposal failed to demonstrate how it is designed to prevent fraudulent and manipulative acts and practices. SEC announced its decision a full week before the July 6 deadline.
Michael Sonnenshein, Grayscale’s CEO, expressed deep disappointment with SEC’s decision. He vehemently disagreed. Sonnenshein said Grayscale Investments will continue to leverage its full resources to advocate for its investors and equitable regulatory treatment of Bitcoin investment vehicles. James Seyffart, an ETF analyst at Bloomberg Intelligence, said a court ruling on the matter is not expected until the third quarter of 2023 to the first quarter of 2024. This means Grayscale Investment’s ambitious GBTC will not be going forward anytime soon.